Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Worldline SA (WRDLY, Financial) reported a 2.1% increase in first semester revenue, with 6.2% underlying growth in merchant services.
- Adjusted EBITDA remained stable at EUR414 million, demonstrating strong cost control.
- Free cash flow generation was prioritized, resulting in EUR82 million, or 16% cash conversion of adjusted EBITDA.
- Significant progress on the Power24 transformation plan, expected to deliver EUR220 million in run-rate cash cost savings by 2025.
- Successful launch of new products and partnerships, including a joint venture with Credit Agricole and strategic partnerships with Visa and Lidio.
Negative Points
- Visible slowdown in domestic consumption in core EU markets during Q2, impacting MSV dynamics.
- Financial Services division experienced a 1.5% decline due to earlier-than-expected re-insourcing of certain contracts.
- Reported net income group share was a loss of EUR29 million, impacted by a EUR174 million non-cash provision related to Power24 implementation.
- Significant intra-semester volatility in transaction volumes, particularly a very weak June.
- Updated full-year guidance reflects cautious stance due to macroeconomic uncertainties, with expected organic growth of only 2% to 3%.
Q & A Highlights
Q: Can you elaborate on the macro and consumption trends observed in June and the assumptions for H2?
A: Gilles Grapinet, CEO: We saw a significant decrease in transaction volumes from Q1 to Q2, particularly in June. This was observed across many consumer-driven verticals and European countries. Factors like poor spring weather and reduced promotional activities in malls contributed to this slowdown. July showed a recovery, but we remain cautious about H2 macro trends.
Q: What are the key factors driving the expected 8% EBITDA growth in H2?
A: Gregory Lambertie, CFO: H2 will benefit from less impact of merchant terminations, reduced rolling impact of 2023 inflation on personnel costs, a bigger contribution from Power24, and additional cost containment measures. We are also taking strong actions on working capital and CapEx to support free cash flow.
Q: Are the trends in lower consumption and in-sourcing of contracts in issuing temporary or structural?
A: Gilles Grapinet, CEO: The current macro environment is not normative due to factors like hyperinflation and interest rate hikes. We expect a return to traditional patterns as these factors stabilize. Marc-Henri Desportes, Deputy CEO, added that the emergence of diverse payment methods and deeper integration into value chains are long-term trends.
Q: How significant is Turkey's contribution to Merchant Services' growth?
A: Marc-Henri Desportes, Deputy CEO: Turkey is a small part of our overall business, contributing less than 2% of group sales. Despite high inflation, its impact on financial results is limited to around EUR10 million.
Q: What are the expected costs and savings from the Power24 initiative?
A: Gregory Lambertie, CFO: We expect to spend around EUR100 million in H2 on Power24, with a total implementation cost of EUR250 million. The initiative is expected to deliver EUR220 million in run-rate cash cost savings by 2025.
Q: How do you plan to maintain Merchant Services' growth amid MSV challenges?
A: Marc-Henri Desportes, Deputy CEO: Growth will come from new products, online activity, and ramping up contracts with big customers. We are also focusing on partnerships and digital onboarding to accelerate customer intake on our competitive platforms.
Q: Can you comment on the competitive landscape, particularly BNP Paribas' ambitions in payments?
A: Gilles Grapinet, CEO: While BNP Paribas has ambitions in payments, our joint venture with Credit Agricole (CAWL) will be a strong performer in the French market from 2025. We believe in the power of strategic partnerships combining superior products with banking distribution networks.
Q: How did the July performance compare to June, and what are the expectations for the rest of the year?
A: Gilles Grapinet, CEO: July showed a significant recovery compared to June, trending back towards Q1 levels. However, we remain cautious about the rest of the year due to ongoing macro uncertainties.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
